Utilities' power stifles effort to cut residential electricity bills

February 27, 2005|By JAY HANCOCK

BEL AIR Mayor David Carey wanted the 3,000 households in his town to be able to band together and hold an electricity bake-off, taking bids from competing power suppliers to try to drive down the price.

And why not? Juice is expensive. Competition can bring savings, as Baltimore Gas and Electric and its parent, Constellation Energy, frequently tell us. And buying in bulk often makes savings bigger.

But on Friday Constellation and other electric companies again got legislators to block legislation that would have made it easier for Bel Air and other localities to buy electricity for residents in cheap, Sam's Club-size quantities. It was a 100-megawatt power play by an industry that wholeheartedly favors the free market - until it threatens profits.

"There was a strong cadre of utility lobbyists working to kill this bill this year - the largest I've ever seen in my five years working this bill and my 10 years with the league," says Scott Hancock (no relation to me), executive director of the Maryland Municipal League, which backed the measure.

No wonder Constellation was worried.

Electricity rate caps expire next year for metro-Baltimore households, giving the company the chance to raise prices and profits. Municipal buying pools might have offered consumers a fighting chance to get the discounts obtained by business and other bulk customers. The bill failed in the Senate Finance Committee by a single vote.

"What has become clear is that in electricity deregulation, the residential customers have been left out, or at least left holding the bag," says Bel Air's Carey. "You see the industrial corporations and large business reaping the benefits."

Bundling households to buy power is called "aggregation," but think of it as collective bargaining for small energy consumers, such as Bel Air residents.

No kidding! I need to check with Brian Billick, but I'm pretty sure competition means sometimes you lose.

To be fair, Harbaugh's point is that the risk of losing so many customers at one time would prompt BGE's power suppliers to charge more for juice. That would be passed on to other BGE customers under the current system, he says.

If that's so, perhaps regulators could make BGE or Constellation, not ratepayers, bear the risk for customer turnover. That's how other businesses work.

But there's an even better solution. The industry will be stunned and amazed to learn this, but there is a way to retain customers that doesn't involve giving money to lobbyists and politicians.

Here it is: Lower prices.

If Mayor Carey and his constituents show signs of dumping Constellation as the generator behind Bel Air's toasters and TVs (and buying another company's power through BGE's wires), Constellation can cut a better deal.

Constellation likes to trumpet the joys of business rivalry. "Competition means savings and improved reliability for customers across the state," Robert J. Korandovich, vice president of a Constellation affiliate, said last year in a news release.

Unfortunately, the state he was talking about was Michigan, where Constellation has much to gain from competition. As the historic vendor to Central Maryland, Constellation has numerous customers to lose. Different debates in different states.

Municipal aggregation in Maryland is possible, but it hasn't caught on because it requires approval from each household, which is expensive and negates bulk-buying discounts.

For cities choosing aggregation, the Senate bill would have automatically thrown all residents into a buying pool unless they opted out, sharply lowering the cost of assembling a big group.

That's silly. First, households would be notified about electricity buying pools and get time to opt out. Second, governments aren't phone vendors; you can vote Mayor Carey out if he messes up your electrical service. Third, you have no choice in your city sewer or police services. Do you feel slammed?

"Opt-out" aggregation has produced mixed results in Ohio and other states that have allowed it. But that's no reason not to try it here. There's little downside - except for entrenched electricity companies.